Some good moves, but not enough to fix mounting problems
- Jannie Rossouw and Lumkile Mondi
South Africa’s budget: Lumkile Mondi and Jannie Rossouw to shed light on the the minister’s speech.
South Africa’s finance minister Pravin Gordhan delivered the country’s annual budget amid growing concerns about slow economic growth, the unequal distribution of wealth and a widening budget deficit. The Conversation Africa’s Sibonelo Radebe asked Lumkile Mondi and Jannie Rossouw to shed light on the the minister’s speech.
Is the budget on the same page with ambitions expressed in President Jacob Zuma’s state of the nation address?
Lumkile Mondi: There is broad agreement in South Africa that the country’s high levels of unemployment, poverty and inequality need to be eradicated. But there are disagreements on how this should be done as could be seen in the different approaches adopted by the president and his finance minister.
In his address Zuma spent a lot of time on the theme of radical economic transformation . He defined this as making fundamental changes in the structure, systems, institutions and patterns of ownership, management and control of the economy.
Given his history the president’s reference to “fundamental change” can be interpreted as a sustained resolve to use crooked and unconstitutional means to squeeze the public sector through state capture. This is in keeping with a president that broke the oath of office.
The finance minister spoke about radical economic transformation with a different tone. He referred to the need to address unemployment, education and training in order to adapt and ride technological changes and the creation of an enabling environment for micro, small and medium businesses.
And the minister sounded a warning against seeing the state’s coffers as a bottomless well.
Jannie Rossouw: The state of the nation address set the tone for radical economic transformation. The budget speech followed this theme, the clearest sign being the introduction of some forms of wealth tax. I view the increase in the top marginal tax rate to 45% as well as a sharp increase (by a third from 15% to 20%) in dividend withholding tax as wealth taxes. South Africans can expect more wealth taxes in years to come.
The fact that the finance minister devoted a significant amount of time and space to talk about radical economic transformation tells us that this will remain a recurring theme for the rest of the current term of the government. Since the municipal elections in 2016 the government has clearly moved its policy stance in this direction. This is evident by the more rapid redistribution from the wealth